Oi SA, Brazil’s fourth largest wireless carrier, which is currently in bankruptcy protection, today announced its Q2 2021 earnings and gave updates on its fiber optic infrastructure unit, which has been re-branded to V.tal (formerly UPI InfraCo), as well as the sale of a 57.9% stake in the business to GlobeNet and BTG.
In early July 2021, Oi SA completed the competitive sale process for V.tal (UPI InfraCo), accepting GlobeNet and BTG’s binding offer. Recall that GlobeNet and BTG valued V.tal (UPI InfraCo) at an enterprise value of R$20.0bn ($3.5bn USD). Oi SA notes that closing of the V.tal (UPI InfraCo) sale is anticipated in either Q4 2021 or Q1 2022, following approval from CADE (antitrust) and ANATEL (telecommunications regulator).
V.tal (UPI InfraCo) – Oi SA’s Fiber Infrastructure
V.tal comprises the largest fiber optic network in Brazil, with more than 250k miles (400k kilometers) of fiber optic network throughout the country. Further, the company is planning to invest R$30.0bn ($5.75bn USD) through 2025, to grow both its transport and fiber-to-the-home (FTTH) network.
Transport Network – Oi SA’s V.tal
V.tal operates a nationwide long-haul backbone, through its optical fiber transport network. Specifically, this long-haul network connects 2.3k+ municipalities in Brazil and covers 60% of municipalities with network redundancy.
Overall, V.tal has 270+ network contracts offering wholesale and neutral network services. Specifically, these contracts allow other carriers and internet service providers (ISPs) to access the V.tal network.
Fiber-to-the-Home (FTTH) Network – Oi SA’s V.tal
As of Q2 2021, V.tal’s fiber network passed 12.0 million homes with fiber-to-the-home (FTTH) technology. Additionally, the company had 2.84 million fiber broadband customers. Therefore, the company’s fiber penetration rate equates to 23.6%.
During Q2 2021, Oi SA’s V.tal passed 1.5 million homes with fiber and added 366k fiber broadband customers. Notably, the company’s fiber build pacing translates to 507k homes passed per month.
Fiber Build and Customer Targets
By Q4 2021, Oi SA projects that V.tal’s fiber network will pass 14.5 to 15.0 million homes. Additionally, by Q4 2021, the company projects it will have ~3.5 million fiber broadband customers. Therefore, the company’s fiber penetration rate will remain steady at 23.7%, at the mid-point.
Long-term, the company projects it will have ~8.1 million fiber broadband customers by year-end 2024. Additionally, the company states that by 2025, its fiber network will pass 32 million homes.
Fiber Average Revenue per User (ARPU)
Upselling has been a key driver of Oi SA’s average revenue per user (ARPU) increase. During Q2 2021, 9.6% of the company’s fiber customer base had speeds of 400+ megabits per second, while 16% of net additions took-up speeds of 400+ megabits per second.
Competitive Positioning
Per ANATEL, Brazil’s national telecommunications regulator, Oi SA has been securing the highest share of fiber broadband net additions during 2021, relative to its competitors. Specifically, these competitors include Vivo (Telefônica Brasil), Claro (América Móvil), and TIM Brasil (Telecom Italia).
